Europe Readies for a Lot More Information

Last week nine European trade groups released 10 industry initiatives to make the securitization market more transparent. The move follows the European Council of Finance Ministers' (Ecofin) call in its October 2007 roadmap to "enhance transparency for investor, markets and regulators" by mid-2008.

To be sure, the industry associations should be applauded for delivering the initiatives on time to meet Ecofin's deadline. But the question remains: will this be enough to mend a broken European market?

No, say most players. At the moment, there really isn't any indication of how and when the market might pick up again. Theories abound, but Europe is still trying to guess if it's touched bottom and the consensus is that some more bad news may be looming. First the market will need to find the balance of where investors are willing to buy and where issuers are willing to sell. Then we can talk of a rebound.

European primary issuance this year has been driven by retained issuance or privately placed deals and it's looking less likely than ever that Europe will poise itself for any sort of a recovery in 2008.

The nine trade groups that jointly put out the initiatives are the Commercial Mortgage Securities Association, the European Association of Co-operative Banks, the European Association of Public Banks and Funding Agencies, the European Banking Federation, the European Savings Banks Group, the European Securitization Forum (ESF), the International Capital Market Association, the London Investment Banking Association and the Securities Industry and Financial Markets Association (SIFMA).

In their view, it's a lack of confidence that has driven investors away. That's why they think creating a climate of confidence is vital for the market to see any investor-driven action in Europe.

These initiatives won't be enough to jumpstart the market. What they will do is improve the framework for a future market, if and when it comes back.

Although investors have always wanted to have more deal data, the fact is that the market has always had access to ample documentation. What these European trade associations did was to provide centralized access to the information and to disseminate the data on a more user friendly level.

What they haven't done is to address the bruised psyche of investors, some - as in the case of the triple-A buyer - have disappeared completely.

"None of this is going to get investors back to the market but this is part of a whole raft of initiatives that will develop and infrastructure for a more robust securitization market that can only support the return of the market," said Bertrand Huet, managing director and SIFMA European legal and regulatory counsel.

By laying the foundation for a better market, Huet believes that it can only help in reinstating confidence. "The major goal is to be open with the investment community about the information available for a robust market when it returns because it certainly will return," said Rick Watson, ESF managing director and head.

At the same time, the European securitization industry is demonstrating a real willingness to work with regulators, perhaps alleviating concerns that the industry is moving dangerously toward overregulation by the European Union and other political bodies that barely understand how securitization works.

The trade associations expect to brief the European Commission on a continuing basis on the status of implementation and said they welcome the commission's and others' input to further refine and develop these initiatives.